New Report Sheds Light on Trade Loopholes That Weaken U.S.
Story Stream
recent articles
The Select Committee on the Strategic Competition between the United States and the CCP, headed by Congressman Mike Gallagher (R-WI) and Congressman Raja Krishnamoorthi (D-IL), released a report on how the U.S. can combat the Chinese Communist Party’s (CCP) economic aggression and strengthen America’s interests geopolitically. 
The takeaway – we must reduce our economic dependence on China by rebuilding our domestic supply chains and preventing intellectual property (IP) theft by the CCP and other adversaries. To do so though, it’s essential to understand how we got here and how the CCP used our own economic philosophy against us. 

In 1972, the American people glued their eyes to the television to witness history. President Richard Nixon flew to China and shook hands with Chairman Mao Zedong, leader of the Chinese Communist Party (CCP) to mark the opening of diplomatic relations between the United States and China after decades of sanctions. President Nixon felt that by opening relations with China, the U.S. could weaken our Cold War rival, the Soviet Union.

When the Soviet Union collapsed in 1991, Western leaders believed communism failed, and that the world would inevitably embrace liberal democracy. The United States naively believed that open economic relations would westernize China and that assumption is largely responsible for allowing China to enter the World Trade Organization (WTO) in 2001. 

Instead of Westernizing and embracing democratic values, China exponentially grew its economic and military power while undermining the very system that allowed it to prosper. The CCP subsidized its own industry and flooded our markets with cheap goods while limiting their imports domestically. Not only was the CCP undermining our economy, but at the same time, they were executing the most extensive theft of IP in history, stealing our government and industries’ most treasured technological secrets. Now, the CCP wields that economic power to oppress its own people and attempt to intimidate the U.S. and its allies while undercutting the U.S. economy and American jobs. 

Over the years, Congress has armed multiple American government agencies with tools to combat economic aggressions from the CCP and other geopolitical adversaries. However the select committee’s report points to a specific weakness that must be fixed – Section 337.  Section 337 of the Smoot–Hawley Tariff Act allows the United States International Trade Commission (ITC) to issue an exclusion order – a blanket ban of any imported good they determine violates patent law. 

Foreign companies, specifically patent trolls and non-practicing entities (NPEs) that acquire patents just to profit from legal settlements, have weaponized the ITC and have flooded the commission, which was created to protect American companies from foreign ones, with cases AGAINST American companies. On average a case can cost an American company more than $5 million, wasting resources on litigation and hindering innovation. These costly cases have broad implications for the U.S. economy, American jobs and national security, which former Senator Patrick Leahy wrote about in the Boston Herald. 

Point blank, the ITC - through its overly broad Section 337 determinations - has allowed foreign companies to weaponize this critical trade enforcement tool against American companies to gain market share in the U.S., extort American companies for millions- and sometimes billion-dollar settlements, and in select cases, actively remove innovations from U.S. consumers. On top of that, there exists no statute of limitations at the ITC. Therefore, malicious companies can wait years before bringing a case, or look deep into the past for products potentially in violation of patent law. 

The report makes it clear – American economic and geopolitical security is at stake and Congress must act to update Section 337 and reform the ITC to protect U.S. interests from foreign adversaries like the CCP. U.S. taxpayer dollars should not be going to an agency that is being weaponized against the domestic companies it was established to protect.

There is already legislation in Congress to do just that – the Advancing American Interests Act (AAIA). This bipartisan bill, introduced by Congressman David Schweikert (R-AZ) and Congressman Don Beyer (D-VA), would reform the ITC to prevent foreign adversaries, like the CCP, from wrongfully targeting American industry. 

For decades the U.S. unknowingly gave the CCP the playbook it needed to become our most powerful economic adversary. Today, we know exactly how the CCP wields and manipulates its economic power and it is now time for lawmakers in Congress to do everything they can, including pass AAIA, to ensure the CCP cannot continue to use our own economic policy against us. 

Matt Mowers served as a Senior White House Advisor at the U.S. Department of State, where he advised the Secretary of State and was engaged on issues including North Korea, immigration reform, and The Global Coalition to Defeat ISIS.